Industry
leaders like US giants Chevron and ExxonMobil, Russia’s LUKoil and China’s CNPC
carry out massive oil production operations in Kazakhstan, investing billions
of dollars and employing up to 17,000 people across the country. The aggregate budget
of the three largest oil and gas projects in Kazakhstan – Kashagan,
Karachaganak and Tengiz – is $45 billion.
“Three major projects – Kashagan, Tengiz and
Karachaganak – account for 75 percent of all oil and gas service contracts in
Kazakhstan. This number is set to grow following the growth of production at
these three fields. All of this brings big economic opportunities, so it is
important for Kazakh service companies to have equal conditions to participate
in these projects,” the chairman of the Union of Oil Service Companies of
Kazakhstan, Rashid Zhaksylykov, told a press conference in Astana.
Zhaksylykov’s
statement about Kazakh service companies wanting to have an equal playing field
to compete with their far larger rivals is part of a growing sentiment in the
vast Central Asian nation after nearly 25 years on the sidelines. Kazakh
companies are determined to be competitive with international companies when it
comes to bidding on lucrative contracts and they hope this will send a message
to buyers that Kazakh companies can be seen as equal partners with their
foreign competitors.
“The average annual turnover of oil services
in the extraction sector is $7 billion, of which 55 percent is carried out in
Kazakhstan, but the share of Kazakh business, however, makes up less than 20
percent of that number,” said the director general of the Union of Oil Service
Companies of Kazakhstan, Nurlan Zhumagulov.
Zhumagulov
said the main reason why Kazakh service companies are left out of the
profitable oil service contracts is that most are put up for bid in closed
tenders.
“The contracts for Kashagan, Tengiz, and
Karachaganak are put up for bid at closed tenders, allowing only invited
companies to take part…these three projects account for 1.5 trillion tenges
(€3.7 billion),” Zhumagulov said.
The
majority of contracts from the operators of Kashagan, Tengiz, and Karachaganak
are awarded to foreign companies, including some of the world’s top service
companies. About 20 of those foreign companies are currently present in
Kazakhstan – with 10 additional companies soon to arrive – and profiting
handsomely from their operations.
A general
shortage of working capital available to Kazakh services companies also
prevents them from keeping up with their foreign competitors.
“TCO is currently tendering several building
contracts with a budget of no less than one billion US dollars. The well-known
international companies can access low-interest credits. With their credit
rating and brand, they can receive cheap credits from foreign financial
organisations. It is very difficult for Kazakh companies to receive credits
even from domestic banks. Even if they got credits, the interest rate would be
enormous – 15 or 20 percent, which makes it very difficult for them to
compete,” Zhumagulov said.
Until
recently, Chinese producers play a major role in keeping Kazakh companies out
of the local energy market with two-year payment terms for services provided.
Local companies could afford to wait 24 months to be paid. According to
Zhumagulov, all major contracts are awarded to companies with Chinese capital
and the tender documents are drawn up in such a way that the Kazakh companies
don’t even try to bid.
The Kazakh
Ministry of Energy has only recently stepped in to support local businesses by
fixing the payment was fixed at two months.
https://www.neweurope.eu/article/kazakh-oil-companies-want-compete-foreign-majors-contracts/